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Picking at ware-houses - Centralized warehouses versus store ware houses

For long e-commerce players were pure play online players that concentrated on centralized warehouses and always had optimizing costs as their key goal.

However, the e-commerce has changed much since Amazon shaped some of the practices.




e-Commerce players - Current Trend

We are now looking at an e-commerce space where some of the larger players are not pure digital players. We are looking at some of the biggest brick-and-mortar retailers picking up their battles with pure play e-commerce players

This has changed the way e-commerce players traditionally react to any new entrant in the market. 

This also means that the stickiness of the brand as a business is more. Showrooming is less of a concern since when it comes to e-commerce, all players are being treated equally.

e-Commerce Focus

However, the e-Commerce players have already started shifting focus beyond cost optimization to customer value, product mix, assortment mix, pricing and delivery.

Many customer friendly practices like Exchanges, refunds, trial and return and video guides on how to choose a specific product are around to help users make a decision.

Picking - Does Retail operations Model matter

One of the key steps in order fulfillment for an online order is picking : The process where an associate goes around the warehouse and picks up items that fulfill your order.

Traditional e-Commerce players have centralized warehouses that make fulfillment more possible. However, given the size of the warehouse, The picking time for an order might keep increasing. 

The brick and mortar players hit back with the idea of using their store warehouses as the picking point. While this is great from a fulfillment perspective, it is a nightmare for retail operations.

Picking from a store warehouse is not so simple for the following reasons:
  • Warehouse layouts are traditionally designed for store associates to stock up the shelves
  • The quantity migth not be always right since most of the retailers have not seen enough data to understand the in-store and online sales mix
  • The possibility of fulfillment from multiple stores add to the headache
  • The retailers's order systems are optimized for in-store sales especially with fulfillment models that also include Direct to Store. These mess up the Re-order quantity completely
  • Stores also need to decide how much inventory to allocate for online versus in-store

Being Omni-channel

Being omni-channel is easier said than done.

When there are innovations on how to optimize existing infrastructure for servicing new channels, we have to be careful on its impacts.

Understanding the business drivers helps a lot. Detailing out the impact of each of the decisions on various channels and building a decision tree helps in decision making.

Conclusion

While it will be interesting to see how picking solutions evolve for different Retail operation models, it will have a huge impact on all other retail systems including vendor integration systems.











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